In late May, Nakhichevan-based Azerbaijani forces entered no-man’s land to the northwest of the exclave, formally part of Armenia, as deep as 10-15 kilometers. The territory was occupied without a single shot, and represents a physically larger portion of land than that acquired by Azerbaijan as a result of the April 2016 clashes. As the Armenian public was preoccupied with the toppling of the regime of Serzh Sargsyan and the Pashinyan government’s subsequent anti-corruption initiatives, the “silent occupation” of land in Armenia’s Vayotz Dzor province went virtually unnoticed. Since further advances into Armenian territory are likely to force Russia’s response, both sides remain cautious to avoid further confrontations.

On May 29, Azerbaijan’s President Ilham Aliyev officially inaugurated the first phase of the long-awaited flagship project Southern Gas Corridor (SGC), through which Caspian natural gas from the Shah-Deniz II field will be transported to Europe. The new project consists of several pipeline networks that pass through Georgia and Turkey (via the Trans-Anatolian Pipeline, TANAP) and further through Greece, Albania and Italy (via the Trans-Adriatic Pipeline, TAP). As Shah Deniz Stage 2 is implemented, gas production will increase from 9 to 25 billion cubic meters (bcm) per year.

On March 16, Sputnik Azerbaijan published information on Azerbaijani participants of the international sport competition Football for Friendship, financed by Gazprom. On the same day, the vice-president of the Italian Senate Linda Lanzillotta, visiting Baku, stated that Russia is behind protests against the construction of the Italian segment of the TAP pipeline. This is one example of how Russia’s means for exercising soft and hard, if covert, power coexist in the former Soviet republics. Yet soft power influences receive decidedly less attention in reporting and discussion on Russia’s relations with these countries and Azerbaijan is an illustrative case in this regard.

The appointment of a new Prime Minister and the new composition of the Cabinet of Ministers of Azerbaijan have raised hopes for speedy economic reforms and liberalization of the national economy. New, young and foreign-educated ministers are expected to create more transparency and accountability in the system, create a more attractive business climate and further ensure the sustainable development of the country. President Aliyev’s new appointments have been welcomed by the public and foreign investors, and hint at the urgent need to deepen the pace of reforms.

On December 5, 2017, Russian Foreign Minister Sergei Lavrov announced that all the key issues regarding the delimitation of the Caspian Sea had been resolved and that a treaty was being prepared for heads of state to sign in 2018 in Astana. Yet less optimistic statements from the other parties, particularly Iran, suggest that Lavrov’s assessment was premature. If Russia and Iran can nevertheless reconcile their differences on the demarcation of the Caspian, this would have important strategic consequences not only for the littoral states, but also for the Caucasus, Central Asia and the Middle East.

Before the Eastern Partnership’s (EaP) Brussels Summit in November 2017, many observers expected the finalization of the new EU-Azerbaijan agreement. However, neither this agreement nor an expected aviation agreement were signed, as many technical challenges remain to be addressed. Azerbaijan signed only a visa-free agreement with the BeNeLux countries for service passports holders and the indicative maps of the Trans-European transport network (TEN-T). The summit’s final declaration clearly articulated the EU’s support for the territorial integrity and sovereignty of its partners and called for peaceful conflict settlement based on international law. The declaration also hailed the Southern Gas Corridor’s (SGC) strategic importance and the progress made in the negotiations for the new agreement.

On December 6, 2017, the Armenian Parliament unanimously ratified the Armenian-Russian US$ 100 million “state export loan.” The accord, signed on October 24, allows Yerevan to borrow funds for purchasing a wide range of sophisticated arms manufactured by Russia in order to implement the “Common Defense Sector Development Plan.” This is Moscow’s second programmed military loan to Armenia, following the US$ 200 million loan agreed in 2015 which is now in the final stage of realization. The pending loan is intended to allow Yerevan to uphold its consistent procurement of military hardware since 2011 in an effort to negate Azerbaijan’s military-technical superiority.

Recently, Kazakhstan, Georgia and Azerbaijan proclaimed their support for and recognition of Spain’s territorial integrity. These announcements were obviously triggered by the outbreak of the crisis around Catalonia’s independence referendum. While Spain’s political destiny is hardly a vital interest for these governments, they do worry about the continuing episodes of minority unrest that could furnish precedents for the dissolution of other multi-ethnic or multi-confessional states like them. On this point, these three governments, probably along with all the others in what used to be the Soviet Union, have justified reasons for concern.

On October 30, 2017, Azerbaijan’s President Ilham Aliyev, along with Turkey’s President Recep Tayyip Erdogan, Georgia’s Prime-minister Giorgi Kvirikashvili, Kazakhstan’s Prime Minister Bakytzhan Sagintayev, and Uzbekistan’s Prime Minister Abdulla Aripov attended the opening ceremony of the long-delayed Baku-Tbilisi-Kars (BTK) railway. “The opening of the railway is of historic and strategic significance,” Aliyev said at the ceremony in the Caspian port city of Alat, south of Baku, to mark the departure of the first trains. In fact, the opening of the new railway provides an alternative route to existing rail services carrying goods from Asia to Europe.

On November 15 during the 7th Regional Economic Cooperation Conference on Afghanistan (RECCA-VII) in Ashgabat Turkey, Afghanistan, Turkmenistan, Azerbaijan and Georgia signed an agreement providing for a major international trade and transport corridor stretching from Turkey to Afghanistan via the post-Soviet Central Asian republics, named the “Lapis Lazuli Corridor.” While many practical problems remain, the development and operation of such a railway corridor has enormous implications for the countries along its route, particularly Afghanistan.